Corporate welfare - Editorial

(another old Belgrade News editorial from May 24, 2005)

Tom Henderson's letter is below, with my editorial response after:

Responding to Rob Natelson’s commentary in The Belgrade News of May 13, I’d like to respond to two of Natelson’s statements: “Since 2000 Montana has been one of the nations most prosperous states,” and “...enjoy the economic benefits along with the rest of us.”

If Montanans are that prosperous, why do we lead the nation in workers who have two or more jobs, and why is our per capita income one of the lowest in all 50 states? Why are our teachers the second lowest paid in the United States and our beginning teachers the lowest paid in the nation? Why is it necessary to raise taxes to pay for essential government services and why are Republicans trying to start a sales tax?

Because of the leadership (or lack of it) in the last twenty years of the Republican dominated governor’s office and Legislature, big business and corporations have had their nest feathered by sweetheart deals, which gave big business and corporations generous tax write-offs and deductions and until big business and corporations start paying their fair share the average citizen and small business person will be making up the difference. If Rob Natelson and the rest of the “carpet baggers” would force big business and corporations to pay their fair share, the average citizen and small business person would get that tax cut.

In Montana, of the top 50 companies with $80 million or more in gross annual sales, 21 paid less than $1000 in corporate income taxes. Six of these paid the minimum of $50. The company with the highest number of sales paid 0.3 percent of total sales in taxes. Compare that with what you pay.

Almost one-third of these companies declared net losses in 2003 (thanks to 20 years of Republican dominated legislation), so their corporate income taxes were less than $1000 and were often $50. That Montana citizen working two jobs or that lowest paid beginning teacher in the nation gets to make up for the lack of that corporate tax.

Fifty years ago, corporations paid 60 percent of all federal taxes, but by 2003 that was down to 16 percent. Guess who has to make up the difference — the average citizen and small business person. If you want to adequately fund schools, corrections, natural resources, transportation, mental institutions, health and services, add law enforcement and highway patrol, and increase pay to state workers, all you have to do is force big business and corporations to pay their fair share.

Please, Rob Natelson, no more corporate welfare at the expense of Montana workers and taxpayers. If you Republicans would quit wasting time trying to destroy the State Supreme Court and the Helena District Court, trying to pass a sales tax, trying to protect your corporate lobbyists, and join the Democrats to remedy the wrongs of the last 20 years, Montana and Montana taxpayers would be much better off.

Tom G. Henderson
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“Corporate Welfare” is one of those incendiary phrases used by the political left to stir up peoples’ emotions. Mr. Tom Henderson of Whitehall attempted to do just that in his recent letter to the editor. Mr. Henderson complains that “...of the top 50 companies with $80 million or more in gross annual sales, 21 paid less than $1000 in corporate income taxes.”

So, did these companies do something illegal? Well, no. They followed existing tax law and took advantage of legal deductions.

I’m pretty sure that Mr. Henderson’s tax returns also reflect every legal deduction and tax credit to which he is entitled. No one is accusing Mr. Henderson of shifting his tax burden to others when he takes his deductions. Why should a corporation be held to a different standard? Indeed, if these corporations filed legal, complete, and honest returns, what exactly is the problem?

He goes on to say that “almost one-third of these companies declared net losses in 2003 ... so their corporate income taxes were less than $1000 and were often $50.” This statement truly begs an obvious question: If a business had a net loss, how can it pay any income tax? It had no net income!

But really, this is all just a smoke screen. Mr. Henderson’s protestations miss this central point. As a matter of simple economics, no matter what the tax structure, businesses do not pay taxes. The amount of taxes levied against a business does not matter.

A business sells a legal product or service to willing consumers. The price of the product is made up of things like business overhead, raw materials, research and development, employee expenses, and profit. Business overhead includes any taxes the business pays. Therefore, the end consumer pays all taxes.

The entirety of the tax structure is borne by the individual, whether directly via his own income tax and social security withholding, or indirectly via the products and services he buys. Every regulation, tax, or fee imposed by the government on a business translates into higher cost to the end user. So Mr. Henderson can either pay corporate taxes via tax shifting, or he can pay them via cost shifting, but he’s the one who will pay every dollar.

But beyond all that, it is clear that those on the political left need to understand a basic principle. The purpose of a business is not to provide revenue to the government. Business is not an extension of government social programs. Business exists to pursue its private, legal pursuits, and hopefully provide a profit to its owners.

The real problem is not where taxes are levied, anyway. Taxes can be distributed in any way the political left wants to dream up. Tax the corporations, soak the rich, give tax breaks to the middle class, whatever inflammatory rhetoric they want to use.

But that won’t make the tax system fair. This is because no tax system that takes too much money is fair. I repeat, no tax system can be fair that takes too much money.

Bottom line: Two-and-a-half trillion dollars is too much money for the federal government, and seven billion dollars is too much for the state. That’s criminal.